Labor Arbitrage 2.0: Is It Still About Process Improvement?

This week you’ll likely read at least one article on how the business process services (BPS) industry is undergoing substantial labor arbitrage through the deployment of robotic process automation (RPA) and other automation technologies. The undertone of these articles tends to tie the value of automation to reducing labor costs. Those who have a longer history in supporting IT for the BPS industry see this a bit differently.

In the early years of BPS — the late 1980s to early 1990s (even though the market has origins in the 1960s) — document imaging and workflow processing technology was the key driver of IT’s role in the BPS market. The ability to remove paper-laden processes and the inherent time and cost of manual steps tied to floor-to-floor couriers and interoffice mail pouches set a compelling IT agenda. Digitization — and then electronically moving documents through a workflow process with visibility, tracking and reporting — opened up an entire industry that has blossomed ever since.

Overall goals: speed, quality, agility

Time and technology improvements bred further efficiencies. As higher-speed, lower-cost network capacity and more powerful desktop computing progressed, it became economically attractive to move those digital documents to any location where lower-skilled functions such as data entry could take place. The days of document image processing requiring high-end workstations and expensive high-resolution displays were over. Costs dropped, and the return on investment (ROI) curves for spending the money to digitize improved. In fact, lower-cost labor was used to offset the cost of deploying the technology. However, the underlying business objectives were speed and quality improvement of the process.

In parallel with this (or perhaps as a result of), process efficiency approaches changed. Whereas limiting the number of steps and handoffs had previously been a goal to gain speed, the technology actually drove processes to increase the number of steps so as to reduce the training or skills required at each step. Automation handled the end-to-end controls, and the time delay of moving work from one step to another (anywhere in the world) vanished. Factory assembly practices had come to the back office BPS market! De-skilling the individual’s role had begun, and the lower-value tasks could now be moved to low-costs locations.

Enter voice over IP (VoIP) in the late 1990s and early 2000s. Suddenly, the front office became digital as well. The corporate network could now move a voice call to an employee anywhere without carrier fees and tariffs. By centralizing the VoIP technology hubs, and using similar work management and sophisticated call routing and high-speed networks, the ability to match the right agent anywhere in the world to the call was a task accomplished in milliseconds! In fact, digitization and workflow had come to the front office BPS market; the ability to quickly move work across centers and de-risk labor market access to key skills became the value proposition for deploying the technology. Again, lower cost offshore labor was used to offset the higher technology cost, but the business objective for most was the agility to ramp service and capacity up or down in any specific market. VoIP itself was only marginally less expensive than the analog approaches.

Next step: task automation

Is it any wonder, then, that much of the current technology focus is on automating the task itself? Given the more than 30-year history and investment in digitization, workflow, process controls and management, the human worker’s (now well-encapsulated) role in mature, digitized processes is fairly easily displaced with any number of technologies for task automation. Furthermore, the sophistication of the task automation tools has been improving for more than 15 years, so stable and mature tools are readily available to enable the next wave of change as a natural next step. Turnover rates, error rates, security and a variety of other factors come into play that expand the ROI model well beyond a pure full-time equivalent (FTE) cost comparison.

So, is the BPS market undergoing a major shift to labor arbitrage through RPA and automation? Or is it a natural evolution? I see it as the latter: the next logical progression to speed and quality in what has already been a long journey. As a result, clients that have refined processes, digitization, workflow controls and well-defined business rules are well positioned to take advantage of task automation as a cost-effective next step in their speed/quality strategy. For those without mature digitization and refined processes in place, it can be a much larger jump (and cost) to accomplish.

Bob Law is director of BPS Core Engineering at DXC Technology. His technical, business and operational background brings a forward-driving progression to the technical platforms and support services that enable our BPS business. A veteran in business process enablement and supply/demand chain integration, his team enables and supports the technology platforms that more than 30,000 BPS agents and client users rely on each day.




  1. […] Over the past decade, the marketplace has transitioned from manual and paper to digitization. Client focus has been on productivity, cost and labor arbitrage. […]

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